DCIT Vs Reliance Industries Ltd. (ITAT Mumbai)
The cross appeals filed by the assessee and Revenue relate to AY 2017-18 and 2018-19, while the assessee also filed a cross objection for AY 2018-19. The appeals arose from orders passed by CIT(A)-57, Mumbai and were heard together as common issues were involved.
The assessee challenged, among other matters, disallowance of weighted deduction under section 35(2AB) of the Income-tax Act on the basis of Form 3CL issued by the Department of Scientific and Industrial Research (DSIR). The assessee had claimed deduction of Rs.8.37 crore and Rs.10.31 crore for AY 2017-18 and 2018-19 respectively. The Assessing Officer disallowed the claims on the ground that the expenditure had not been approved in Form 3CL, and the CIT(A) confirmed the disallowance.
The assessee contended that section 35(2AB) provided for approval of the scientific research facility by DSIR and did not itself require approval of the expenditure. It also contended that the amendment to Rule 6(7A) could not override the Act, and alleged violation of principles of natural justice as DSIR had not given reasons for not certifying part of the expenditure or provided an opportunity of hearing.
The Tribunal noted that section 35(2AB)(3) had been amended with effect from 1 April 2016 to require reports to be furnished in the prescribed manner. On a combined reading of section 35(2AB)(3) and Rule 6(7A), the Tribunal considered the amended provision to be an enabling provision for the procedure under which DSIR could quantify the expenditure. However, since DSIR had not certified part of the expenditure and had not furnished reasons for doing so, the Tribunal held that there was a violation of the principles of natural justice. It therefore restored the issue to the Assessing Officer in both years for ascertainment of the reasons for non-certification and fresh examination after providing adequate opportunity of being heard to the assessee.
